A group of state attorneys general, led by Ohio's Mike DeWine, are working to address consumer complaints regarding credit-reporting agencies and may even file lawsuits under the Fair Credit Reporting Act, The Columbus Dispatch reports. Consumers who go through their state attorneys general to report credit issues are more likely to have their problems resolved than if they faced off against the credit-reporting agencies alone, the article said. For more, read the full story.

Registration is now open for the 2012 Ohio Mortgage Bankers Association Convention, which takes place at the Crowne Plaza in Dublin, Ohio, from Monday, May 14th through Wednesday, May 16th. The convention, "Navigating Our Road to Recovery," features an eight-hour continuing education course on FHA insured loans that will be presented by Diehl and Associates. Consumer Financial Protection Bureau Director Richard Cordray is also scheduled to address attendees. For more information, visit the OMBA website.

The Consumer Financial Protection Bureau (CFPB) released a bulletin indicating that in keeping with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act), a “state may grant a transitional loan originator license to an individual who holds a valid loan originator license from another state,” a press release from the Bureau said. The CFPB offered clarification that states are not permitted to grant transitional licensing to individuals who are registered by unlicensed originators, the press release said. Check back with OhioFinancialServicesBlog.com as we will be commenting further on the impact of this guidance. 

The Consumer Financial Protection Bureau (CFPB) recently released a bulletin outlining the responsibility of supervised financial institutions to effectively manage risks associated with third-party service provider relationships. The Bureau will closely monitor “service providers’ interactions with consumers,” and will “hold all appropriate companies accountable when legal violations occur,” a press release from the Bureau said. Banks and nonbanks supervised by the CFPB are advised to conduct thorough due diligence “to ensure that business arrangements with service providers do not present unwarranted risks to consumers,” the press release said.

The Ohio Department of Commerce recently named Bob Niemi as Deputy Superintendent for Consumer Finance in the Division of Financial Institutions (DFI). Niemi has more than 20 years experience in the mortgage banking industry and currently serves as Executive Director of the Ohio Mortgage Bankers Association. Starting in his new role on April 23, 2012, Niemi will oversee the DFI’s Consumer Finance division, which “regulates non-depository consumer finance companies,” according to a press release from the Ohio Department of Commerce. 

On April 2, 2012, Governor Kasich signed into law what has been coined the “right to cure” bill (HB 275) to amend the Ohio Consumer Sales Practices Act (CSPA).  The bill permits companies sued under the CSPA to provide a “cure offer.”  According to advocates for HB 275, the bill is in response to the volumes of lawsuits filed in Ohio courts by consumers who could resolve disputes short of trial under this amendment.  For more, read the full article here.

The CFPB issued Bulletin 2012-02 responding to inquiries relating to compensation payments to loan originators under Regulation Z (“Compensation Rules”).   Under Dodd-Frank, rulemaking authority for Reg Z transferred to the CFBP away from the Federal Reserve Board. 

Reg Z generally provides that a loan originator may not receive (and no person may pay a loan originator) compensation based on any terms or conditions of a mortgage transaction.  Compensation includes salaries, commissions, and bonuses.  But the Bureau has received several questions about whether and how the Compensation Rules apply to qualified profit sharing, 401(k), and employee stock ownership plans ("Qualified Plans"). 

Recognizing that the Compensation Rules fail to adequately address this scenario, the CFBP clarified that loan originators can participate in these Qualified Plans derived from loans originated by employees covered under the Compensation Rules.  But expect the CFBP to provide additional clarity on these arrangements.  

The Consumer Financial Protection Bureau (CFPB) announced a proposed rule last week that would "codify protections for privileged information submitted to the Bureau by the financial institutions it regulates," according to a press release from the CFPB. A copy of the proposed rule has been submitted to the Office of the Federal Register and is open for comment for 30 days after it is published in the Federal Register. A more comprehensive review of this rule will be available on this blog in the future. In the meantime, read the text of the rule here or read the CFPB press release here.

Both Federal Reserve Chairman Ben Bernanke and Consumer Financial Protection Bureau Director Richard Cordray reassured members of the Independent Community Bankers of America during their national convention yesterday that the regulations intended for the "too big to fail" financial institutions will not be "evenly applied to community banks," HousingWire reports. The Fed "recently established a Community Depository Institutions Advisory Council, which draws its membership from smaller banks, credit unions, and savings associations" in an effort to better understand their needs and more clearly communicate which regulations apply to them, the article said. For more, read the full story here.

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced yesterday that his agency is working to "establish a general framework to share data" among state and federal authorities regarding consumer financial protection issues such as payday loans, foreclosure scams, auto loans, and debt collection, Bloomberg reports. The central point of the information-sharing deal will be the Federal Trade Commission's Consumer Sentinel network, which is a database where attorneys general can submit complaints about financial services that the CFPB can then use to detect trends in scams and unfair lending, the article said. For more, read the full story here.

• Opt out of ATM overdraft coverage so that your card is simply declined if there are insufficient funds for a purchase.
• Link your checking account to a savings account or credit card. Although a fee may be incurred, it will likely be less than an overdraft charge and will prevent checking account transactions from ever being declined.
• Track your balance and sign up for low balance alerts, if applicable.

For more, read the full consumer advisory here.

Small financial services providers will be greatly impacted by new CFPB rules, particularly rules concerning lending to borrowers.  The CFPB recently announced that it will use the Small Business Review Panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA). In certain cases, this Act requires the bureau to form and chair a panel alongside representatives of the Small Business Administration (SBA) and the Office of Management and Budget. That panel will meet with a group of representatives of the small providers directly affected by the new CFPB guidelines.

The 15 to 20 representatives will provide feedback on the rules the bureau is considering and on alternatives to minimize negative impacts on small businesses. Within 60 days of convening, the panel will complete a report on the issues, including input they receive, their findings on the economic impacts of the proposal, and any alternatives that achieve the proposal’s objectives while minimizing unnecessary burdens.

A “small entity” may be a small business, a small organization, or a small government, as defined by the Act.  Here are some of the rules the bureau is considering:

• whether to require that these preliminary estimates carry a disclaimer that tells the consumer that the document is not the integrated Loan Estimate required by TILA and RESPA.
• current rules provide that when a lender provides a consumer with an estimate of the cost of its own services under RESPA, the actual cost cannot be higher than the estimate unless there is a valid change of circumstances. The bureau may seek to apply the same limitation to estimates of services provided by the lender’s affiliates or by companies the lender requires the consumer to use.
• consideration requiring delivery of the integrated Settlement Disclosure stating the consumer’s final loan terms and costs at least three business days before closing, although some flexibility may be provided.

• The principal loan amount
• The current interest rate
• The date on which the interest rate may next reset
• A description of any late payment penalty fees
• Information about housing counselors
• A telephone number and email address that may be used to contact the mortgage servicer

For more, read the full CFPB press release here or view the draft mortgage statement here.

The Consumer Financial Protection Bureau (CFPB) has announced that it is holding a second field meeting in a town hall format in New York City on February 22, 2011.  This time, the bureau will discuss customers’ experiences with checking account products and services.

In January, the bureau held its first field hearing in Birmingham, Alabama to discuss payday loan products.  

In the next six months, the Consumer Financial Protection Bureau (CFPB) plans to issue a series of rules, orders, and other initiatives that are expected to broadly impact financial institutions and lenders. Among other lender related actions, the Bureau expects to issue final rules that will assist lenders in determining which borrowers have the ability to repay loans. The CFPB also plans to announce initial rules related to supervision and the definition of “larger participants," which is critical in determining which nonbanks outside of the residential mortgage, private education lending, and payday lending markets will fall under the scope of the CFPB supervision program. The Bureau will also announce final regulations establishing procedures for investigations, which may signal the start of enforcement actions in 2012. Read the full article here. 

On February 8, 2012, the Ohio Supreme Court will entertain oral arguments in a case captioned, State of Ohio ex rel. Michael DeWine, Attorney General of Ohio, et al. v. GMAC Mortgage, LLC, et al.  The threshold issue that the Court will determine is whether a mortgage servicing company that collects monthly mortgage payments, negotiates late fees and loan adjustments and pursues foreclosure actions against homeowners on behalf of mortgage lenders can be held liable for civil penalties under the Ohio Consumer Sales Practices Act.  We will provide an update following the oral argument. 

In a speech to Congress on January 24, CFPB Director Richard Cordray explained that “gross imbalances in consumer financial markets, most notably in the mortgage market, were a significant cause of the recent financial crisis.” As we announced in our January 13 blog post, the bureau released its Mortgage Origination Examination Procedures (Procedures). These Procedures act as a field guide for examiners tasked with assessing mortgage brokers and bankers’ compliance with the new CFPB procedures and federal consumer laws.

The bureau explains that examination objectives are to assess the entities’ compliance systems in place, identify acts that increase risk of violations of federal consumer laws, fact-find, and determine if lenders have violated federal consumer laws or are guilty of an unfair, deceptive, or abuse act or practice (UDAAP) as outlined in the Dodd-Frank Act.

While the bureau will examine lenders providing traditional and conventional loans, there is no doubt that CFPB lenders have been tasked to pay heavy attention to lenders’ policies and procedures that provide “subprime” and “non-traditional loans.” The bureau defines subprime loans as those with higher interest rates and charge fees to compensate the lender for lending to borrowers with impaired credit. Non-traditional loans tend to be interest-only loans and pay option ARMs.

Once examiners determine that a lender offers subprime and non-traditional loans, the Procedures provide that examiners will determine if advertising and promotional materials provide clear and understandable information about the risks associated with those products. Likewise, examiners will want to see that lenders provide information enabling borrows to determine if the product meets the borrowers’ needs.

What’s more, if the lender originates high-cost mortgages whereby the APR will exceed 8 percentage points for first mortgages or 10 percent for second mortgages and/or high mortgage points are applied, examiners will determine whether the lender routinely provides certain TILA disclosures to borrowers.

Another area of focus for CFPB examiners will be underwriting guidelines of mortgage bankers. If the mortgage banker originates non-traditional high-cost loans, examiners will assess if the lender has complied with Regulation Z requirements, including obtaining required documentation of income and assets from the borrower. Also, examiners will determine if underwriting standards take adjusted payments into account in considering the borrower’s ability to repay the loan when the payment amount is expected to change. Mortgage bankers that obtain little documentation in conjunction with originating a non-traditional or subprime loan can expect extreme scrutiny.

Finally, examiners will have unfettered access to lenders’ internal and external documents and policies including, organizational charts, loan applications, internal notes, disclosures, underwriting guidelines, computer programs, compensation policies, audit and compliance reports, and advertisements. Hence, mortgage brokers and bankers should understand the potential examination risk involved when originating subprime and non-traditional mortgages.

In late 2011, the CFPB rolled out its “Know Before You Owe” concept that provides the public with an opportunity to review and comment on real estate closing disclosure forms.  Real estate closing disclosure forms comprise of the Truth in Lending Act form and the RESPA HUD-1 Settlement Statement.  These forms are intended to help a homebuyer understand the key terms, conditions, and costs of the loan.

The bureau explains that consumers find real estate closing disclosure forms to be too complicated and cumbersome to understand.  After testing two template disclosure forms titled “Mimosa” and “Sassafras,” the bureau received comments about those forms.  With “Sassafras” winning out as being more consumer friendly, pleasing to the eye and better organized, the bureau recently posted two new template disclosure forms titled “ Butternut” and “Hemlock.”

Final template disclosure forms are due out in February 2012. 

On January 24, the Office of the Comptroller of the Currency (OCC) announced that it is seeking comment on a proposed Dodd-Frank rule requiring banks and thrifts with greater than $10 billion in assets (covered institutions) to conduct an annual "stress test."  The purpose of a stress test is to assess the institution’s capital adequacy and to "aid in identifying downside risks."  The rule would also require institutions to submit a report to the Federal Reserve Board with findings from the stress test.

The public comment period closes March 26, 2012. 

On January 23, the Consumer Federal Protection Bureau (CFPB) and the Federal Trade Commission (FTC) signed a Memorandum of Understanding (MOU) to coordinate their consumer protection activities and to avoid duplicating law enforcement and regulatory actions at the federal level.

The Dodd-Frank Act requires the CFPB and the FTC to collaborate to ensure consistent regulatory treatment of consumer financial products and services. Jon Leibowitz, Chairman of the FTC, believes that “this agreement ensures that businesses will not be double-teamed by the two agencies.” Some of the coordinating efforts by the CFPB and the FTC outlined in the MOU include the following:

• Regular meetings to coordinate upcoming law enforcement, rulemaking, and other activities;
• Informing the other agency, absent exigent circumstances, prior to initiating an investigation or bringing an enforcement action. This notice will prevent duplicative or conflicting enforcement efforts and undue burdens on industry;
• Consulting on rulemaking and guidance initiatives to promote consistency and reflect the experience and expertise of both agencies;
• Cooperation on consumer education efforts to promote consistency of messages and maximum use of resources; and
• Sharing consumer complaints among the agencies.

The MOU lasts for three years.

For those who send money internationally, the CFPB issued new rules governing remittance transfers.   Among other requirements, the new disclosures will require companies providing international transfers to disclose the exchange rate, fees, and the amount of money to be delivered to the recipient in the foreign country.  Transmitting companies must also provide a receipt or proof of payment and tell the customer the date that the money will arrive to the recipient.

Companies now must investigate any reported problem with a transfer, and at times, a customer can be refunded or transfer without charge if money fails to arrive when promised.   These rules are effective January 2013.  These new rules will impact companies such as Western Union and MoneyGram who will now have to comply with the new requirements.  But the new rules likewise apply to banks, savings and loans companies and credit unions. 

Quoting Dr. Martin Luther King, Jr., in prepared remarks, CFPB Director Richard Cordray explained his vision for payday lending reform while at the same time telling the audience that he understands the need for payday loan products.  This field hearing occurred in Birmingham, Alabama on January 19th. 

Director Cordray provided a definition for payday loans and explained that lenders collect at least $7 billion annually in fees.  He said that now that the CFPB has the authority to examine non-bank lenders, “the Bureau will be giving payday lenders much more attention.”  He also mentioned that the CFPB will scrutinize bank products that provide short-term "advance" loans to customers.

Importantly, Director Cordray announced the unveiling of the Short-Term, Small Dollar Examination Procedures, a field guide for payday lending examiners to use nationwide.  We will be providing an analysis of the field guide in days to come.   

In accordance with the Ohio Administrative Code, the Ohio Division of Financial Institutions is set to hold a public hearing concerning the adoption of new rules and revisions of exhisting rules that impact the credit union industry.  The hearing will take place on February 1, 2012.  The Division regulates Ohio chartered credit unions.  The proposed rule changes can be found here. 

As was reported earlier, Richard Cordray's first hearing as director of the new Consumer Financial Protection Bureau convenes today in Birmingham, Ala., to hear testimony on the payday-loan industry, which has a reputation for "enticing low-income customers into a cycle of repeat borrowing at high interest rates," an article in The Columbus Dispatch reports. For more read the full story here.
 

In what promises to be a watershed moment in the first days of Director Cordray’s leadership of the CFPB, the debate over the regulation of the payday loan industry will begin in Birmingham, Alabama on January 19th.   The CFPB will hold its first “field meeting” at Birmingham Convention Center.  The event was first scheduled to be held at the Birmingham Civil Rights Institute.  But due to the overwhelming response, it was moved to the larger location.

In addition to Director Cordray’s comments, the field hearing will include testimony from consumer groups, civil rights groups, industry representatives and members of the public.  It was no accident that the CFPB chose Alabama for its first hearing as it explains that Alabama is “a state with one of the highest number of payday lenders per capita in the country.”  Alabama does regulate payday loans and caps the loan amount to $500 and caps the interest rate that can be charged on the loan.  Check back soon as we will provide a recap of the field meeting discussion.

The CFPB will launch its new initiative titled the Office of Minority and Women Inclusion (OMWI) on January 20, 2012.  It is no mistake that the CFPB announced this new office the same week that the nation celebrates the life and work of Dr. Martin Luther King, Jr.

According to the CFPB blog post, the OMWI and its working group will develop standards for:

• equal employment opportunity, workforce diversity, and inclusion at all levels of the agency;

• increased participation of minority-owned and women-owned businesses as vendors for the CFPB; and

• assessing the diversity policies and practices of the CFPB's regulated entities. 

Significantly, it appears that the OMWI is not only an internally focused working group, but this new office will also be outwardly focused, as for the first time, diversity programs of banks and nonbank lenders will be scrutinized by a regulatory agency. 

The CFPB is accepting comments from the public regarding the produces and services currently offered by to or used by students and their families for financing post-secondary education.  The deadline for submitting comments to the CFPB is January 17, 2012.  Comments can be provided here. 

Under the Dodd-Frank Act, the CFPB will regulate companies that offer “private education loans” offered by schools or financial institutions to finance higher education.  This new regulatory authority does not, however, apply to Title IV federal loans.

Certainly, the CFPB is looking to tighten the existing disclosures provided by private education lenders regarding the terms of these loans.  Likewise, the CFPB is seeking comment regarding whether students are adequately informed of their rights as borrowers on private education loans and it is interested in alternative repayment plans that have proven to be effective in preventing loan default.

The CFPB has announced the publication of the mortgage origination examination procedures.  These guidelines are a "field guide" for examiners reviewing mortgage originators in both the bank and nonbank industries. 

These examination guidelines will apply to both lenders and brokers and nonbank entities such as payday lenders. In sum, the supervision activities will include document gathering, data analysis, onsite examination and ongoing monitoring.

The Consumer Financial Protection Bureau (CFPB) announced this week that its director, Richard Cordray, promoted Kent Markus within the Office of Enforcement from deputy assistant director to assistant director, according to a press release from the bureau. Markus previously served as chief legal counsel to former Ohio Gov. Ted Strickland during his administration. Markus has also served as the first assistant attorney general of Ohio, the deputy chief of staff at the Department of Justice and counselor to the United States Attorney General, the release said. Read the full announcement here.

After Director Cordray’s appointment, the CFPB reminded the public what its approach will be for nonbank examination.  For certain nonbanks including mortgage companies, payday lenders, and private education lenders, CFPB supervision is effective immediately. 

The CFPB is careful to note that its goal is to “prevent harm to consumers and promote the development of markets for consumer financial products and services that are fair, transparent, and competitive.”

To accomplish these goals, the CFPB will employ a combination of any of the following tools as outlined in the recent CFPB Blog post: requiring nonbanks to file certain reports, reviewing the documents that nonbanks utilize to offer products and services to customers, reviewing nonbank compliance systems and policies, and reviewing the correspondence between nonbanks and customers. 

The CFPB explained that “in general,” it will notify a nonbank in advance of an examination.  Thus, that leaves the door open to “surprise” CFPB examinations.  That should sufficiently concern nonbanks that will be examined by the CFPB.

Expect the CFPB to coordinate with the Ohio Department of Commerce for nonbank examinations. 

While many consumer advocacy groups have enthusiastically applauded President Obama’s recess appointment of Richard Cordray to the CFPB, many Republican lawmakers and financial trade associations have called into question the legality of the recess appointment. Director Cordray has already explained that he has been given broad authority under the Dodd-Frank Act and intends to exercise the authority to regulate large banks and virtually all non-bank lenders immediately. But Republicans argue that the chamber was not in recess, because it had been using “sessions,” which lasted a few minutes in order to stay open during the holidays.  To read the full article and learn more about the Jones-Turner decision and the lessons learned from it for those defending against class certification motions, click here.  

UPDATE- The United States Justice Deparment issued an opinion recently, approving President Obama's appointment.

Just one day after being appointed as the new director of the Consumer Financial Protection Bureau by President Obama, Director Richard Cordray plainly stated that prior to his appointment, the CFPB lacked the "ability to supervise financial institutions other than big banks-like non-bank mortgage lenders and services, and payday lenders." Likewise, Director Cordray said that he will make "Sure that financial institutions are playing by the rules" explaining that there will be "real consequences to violating the law." 

The Dodd-Frank Act gives the CFPB the authority to promulgate rules and examine non-bank companies irrespective of their size.  According to Director Cordray partly due to his appointment delay, the CFPB will promptly begin exercise its now broadened authority.

During Director Cordray's speech at the Brookings Institution, he said non-bank companies "often compete with banks but have largely escaped any meaningful federal oversight" and that the CFPB new supervision program "may be a challenge" for non-bank lenders. 

Finally, Director Cordray made was careful to note that his job is to protect consumers by explaining that Americans like the idea of having a consumer watchdog to protect them.  See Director Cordray's blog post here regarding his appointment. 

President Barack Obama has appointed former Ohio Attorney General Richard Cordray as the first director of the Consumer Financial Protection Bureau, according to an article posted on Bloomberg Businessweek.  An official announcement was made as Cordray and Obama visited a school in Shaker Heights this afternoon.  Cordray is scheduled to begin his new duties this week.

Bypassing the Senate Republicans' December 8 vote to block Cordray's nomination, much controversy remains regarding the process Obama used to install Cordray.  Read the full story here.  
 

Before the second session of the 112th Congress begins on January 3, a progressive advocacy group is hoping for a last-minute gift — the recess appointment of former Ohio Attorney General Richard Cordray to the Consumer Financial Protection Bureau (CFPB).  According to an article in The Columbus Dispatch, People for the American Way Executive Vice President Marge Baker said the new CFPB will not be "able to do significant portions of its work" if President Barack Obama does not override the Senate Republicans' December 8 filibuster that blocked Cordray's nomination. 

Created to protect consumers from lending and mortgage practices related to the financial crisis, several of the monitoring duties and newly created powers established under Dodd-Frank Act cannot be enforced without a director, as reported in our Dec 9 post. 

Read the full article. 

Raj Date, special advisor to President Obama, is effectively running the Consumer Financial Protection Bureau (CFPB) while it awaits a director, an article in ABA Banking Journal reports. The article offers tips for working with the CFPB, and discusses how the bureau's data-driven philosophy of regulation and collegial atmosphere make it a very different government regulatory body. For more, read the full story here.  

The Consumer Financial Protection Bureau (CFPB) recently launched the CFPB Ombudsman's Office in an effort to provide some comfort to the financial services companies that it now regulates.  Much like how most reputable large metropolitan newspapers provide their readers with an independent, impartial and confidential resource to voice concerns, the CFPB Ombudsman's Office will assist in the "resolution of individual and systematic issues" that financial services companies may have with the CFPB.  The current ombudsman is Wendy Kamenshine, formally an ombudsman and chief of programs, policy, strategy and research with the U.S. Department of Homeland Security. The Ombudsman's Office was established by the Dodd-Frank Act.

ALI-ABA is offering an a comprehensive one-day course on the Consumer Financial Protection Bureau (CFPB) and Dodd-Frank titled "The Consumer Financial Protection Bureau: A New Regulatory Word for Banks, Thrifts, Mortgage Lenders, Credit Card Companies, and Consumer Financial Service Companies."  The course will be offered in New York City on January 20, 2012 and will examine the regulatory powers of the CFPB, review the structuring of the bureau's operating divisions, and discuss CFPB interaction with other federal and state agencies charged with regulating the consumer financial marketplace. Representatives of the CFPB, other government agencies and private practitioners will be panelists and presenters. Click here for the online brochure. 

A denial of class certification involving a case brought against Fifth Third Bank in the Southern District of Ohio is heading to the Sixth Circuit. In Arlington Video Productions, Inc. v. Fifth Third Bank, 2008 U.S. Dist. LEXIS 51196, the district court declined to certify a class whereby the class representative alleged that Fifth Third failed to properly identify the nature of fees deducted from the class members’ banking accounts.

These class claims were tethered to a breach of contract claim concerning the signature cards class members signed to open their banking accounts. Holding that the “delving” into the account information for each class member would not be practical, the district court held that Arlington Video failed to meet any of the class requirements.

Attempting to obtain recovery for alleged fees that the bank collected, Arlington Video attempted to certify a class of:

All individuals and entities who have or have had checking accounts with Fifth Third Bank in the United States, who were charged and paid a fee for a service that was not listed on a then current Fifth Third Fee Schedule, or was in an amount that was different from that stated on a then current Fifth Third Fee Schedule, prior to the assessment of the charge, during the applicable limitations period.

Notably, plaintiffs excluded Fifth Third employees, officers, directors, and other bank representatives from the proposed class. Further, Arlington Video acknowledged that the 12 states where Fifth Third has branch locations apply different statute of limitations to breach of contract claims. Thus, Arlington Video sought to certify subclasses of customers who banked at Fifth Third that were allegedly charged “undisclosed fees” by grouping them based on the limitations period applicable in those states.

With respect to numerosity, the district court carefully analyzed the requirements under the Truth in Savings Act and explained: 1) the Act only pertains to consumer and not business accounts; and 2) the Act did not require certain fee disclosures when Fifth Third decided to alter its fees. Importantly, the district court opined that determining which account holders qualified as class members would require “delving into the account information of each of those customers” to understand whether prior notices about fees were received by the account holders. In other words, because extensive factual inquiries would be required, the district court determined that class certification is improper.

As for commonality, the district court plainly stated that there is no uniform way to determine if valid notice of a new fee was provided to a customer in any particular case. This feasibility conclusion tied directly to the concerns the district court had with the numerosity element.

Next, the district court determined that Arlington Video’s failure to specifically allege that Fifth Third failed to notify customers concerning fee changes severely undermined the class claim. As courts have determined, typicality determines whether a sufficient relationship exists between the injury to the plaintiff and the conduct impacting the class. The district court determined that typicality is lacking where in individual inquiry to establish liability is necessary.

Finally, the district court agreed with Fifth Third and held that the class representative could not represent the interest of the class through qualified counsel. In addition to the concerns of typicality and commonality, the district court explained that there were 75 different types of banking accounts, with “infinite potential for variations” in those agreements based on the customers’ needs. The Sixth Circuit will certainly grabble with the individual inquiries highlighted by the district court that dominated the holding in Fifth Third’s favor.

The Ohio house Judiciary and Ethics Committee approved HB 275 on December 13, 2011.  For what has been coined the “right to cure” bill to amend the Ohio Consumer Sales Practices Act (CSPA), bill sponsors Representatives Young and Slaby seek to permit companies sued under the CSPA to provide a “cure offer.”  According to advocates for HB 275, the bill is in response to the volumes of lawsuits filed in Ohio courts by consumers who could resolve disputes short of trial under this amendment.

Specifically, under HB 275, if a consumer files a CSPA action against a company that falls within the CSPA purview, the company can make a cure offer by offering money to the consumer or the consumer’s attorney in response to the alleged CSPA violation.  This cure offer must include reasonable legal fees related to the filing of the initial complaint up to $2,500 and court costs the consumer incurred relating to filing the complaint.

Certainly, the consumer may reject this offer within 30 days upon receiving the offer and proceed with the civil action.  But the consumer cannot collect treble damages, court costs, or attorneys’ fees upon rejecting the cure offer, if the court awards the customer “actual economic damages” that are less than the value of the cure offer. 

Finally, HB 275 provides that a cure offer is not admissible as evidence at consumer’s trial.  But the judge may consider a properly delivered cure offer after the verdict, for the limited purpose of determining whether treble damages, court costs and attorneys’ fees should be awarded. 

The Columbus Dispatch reports that Texas-based American Home Mortgage Servicing Inc., one of the country's largest subprime mortgage-service companies, will change several of its practices with regard to foreclosures as part of a legal settlement reached yesterday with the state of Ohio. In 2009, then-Attorney General Richard Cordray accused the company of "ignoring requests for assistance, providing incompetent customer service, failing to modify loans on a timely basis and offering unfair and deceptive terms when it did modify loans," the article said. Among other things, the settlement orders the company to "process Ohio loan-modification requests in a timely fashion."

The holiday shopping season is in full gear and the lending industry is as well. The Columbus Dispatch reports that online payday lenders have increased their loans to consumers by nearly $3 billion last year. During the same period, storefront payday lenders in Ohio have decreased by about half.

Consumers who get payday loans, online or otherwise, are encouraged by all in the industry to look at their alternatives including short-term bank loans before selecting deciding on a payday loan to avoid late fees, eviction or other financial ramifications they might otherwise incur. 
 

According to The Columbus Dispatch, a Franklin County Common Pleas judge has determined that Minnesota-based Allied Interstate Inc.'s debt collection practices were unfair and deceptive. Allied, which has offices in Columbus and is one of the country's largest debt collectors, was accused of making collection calls outside of the approved hour window, unauthorized withdrawals from bank accounts, and idle threats, among other things.

Hence, it's a good time to review the CFPB's authority without a director. The Dodd-Frank Act provides that the Federal Reserve and the Treasury may perform certain functions in the absence of a director. Among other powers, the CFPB can:

• Write rules, orders and guidance regarding any of the consumer laws that transfer to the CFPB including proposing and finalizing certain rules;
• Conduct examinations and issue enforcement orders against banks, savings associations or credit unions with assets greater than $10 billion; 
• Replace the Federal Reserve, OCC, OTS, FDIC, NCUA, and HUD in any lawsuit or proceeding that was commenced by or against one of these agencies prior to July 21, 2011; and 
• Assume RESPA related authority and assume enforcement duties under the Federal Trade Commission.

But without a director, the CFPB cannot enforce "newly-created" powers established under Dodd-Frank. These newly-created powers derive from Sections 1022, 1024 and Title X, Subtitle C of Dodd-Frank and include:

• Prohibiting unfair, deceptive, or abuse actions or practices;
• Preparing and finalizing disclosure requirements and forms aimed at ensuring clear disclosures in the lending context; and
• Determining which non-depository institutions should be under the CFBP's authority and supervising these institutions. 

Notably, the CFPB is also receiving complaints about mortgage loans on its website and this practices will continue. But again, without a director, the CFPB can only bring enforcement actions against banks with more than $10 billion in assets for violations of the federal consumer financial laws for which Dodd-Frank transferred enforcement authority to the CFBP from other agencies. 

Richard Cordray's nomination for director of the Consumer Financial Protection Bureau was blocked earlier today by Senate Republicans with a final vote of 53-45. According to The Associated Press, President Obama spoke shortly after the vote stating that he does not see any reason why Cordray should not be confirmed by the Senate and that he will not let politics get in the way of allowing Cordray to begin working to protect consumers.
 
During a speech in Kansas yesterday, USA Today quoted the President as saying:  
 
"Every day we go without a consumer watchdog is another day when a student, or a senior citizen, or a member of our Armed Forces – because they are very vulnerable to some of this stuff – could be tricked into a loan that they can't afford – something that happens all the time. And the fact is that financial institutions have plenty of lobbyists looking out for their interests. Consumers deserve to have someone whose job it is to look out for them. And I intend to make sure they do. And I want you to hear me, Kansas: I will veto any effort to delay or defund or dismantle the new rules that we put in place."
 
The Consumer Financial Protection Bureau was created to protect consumers from many of the lending and mortgage practices that brought about the financial crisis. According to republicans, the agency has too much power and too little accountability.

According to a Market Watch press release, the Consumers Union called on the Senate today to confirm former Ohio Attorney General Richard Cordray as the director of the new Consumer Financial Protection Bureau (CFPB). The Senate is expected to vote on the Cordray nomination as early as this Thursday, December 8.

The effort to confirm Cordray has been held up in Congress by a group of Senators who have pledged to oppose any nominee to head the new consumer watchdog. The Senators opposing the Cordray nomination are seeking changes to the CFPB that would weaken its ability to protect consumers. Opposition to the nomination is preventing the CFPB from exercising its full powers to protect consumers, according to Consumers Union.